Dollar Little Changed Despite Dovish Fed Comments

9/6/2017 2:06 PM ET

The dollar weakened against all of its major rivals Wednesday, after dovish comments from Fed policymakers overnight rekindled doubts over the central bank's ability to hike rates a third time later this year.

The Fed Governor Brainard asserted that the US inflation is "well short" of the Fed's target and he would not support further tightening without signs of a pickup in inflation.

If inflation persistently falls short of the central bank's 2 per cent target, "it would be prudent to raise the federal funds rate more gradually," Brainard said in a speech at The Economic Club of New York.

Separately, Minneapolis Fed President Neel Kashkari suggested that the recent rate hikes may have hurt the US economy.

"It's very possible that our rate hikes over the past 18 months are leading to slower job growth, leaving more people on the sidelines, leading to lower wage growth, and leading to lower inflation and inflation expectations," Kashkari said at a speech at the University of Minnesota in Minneapolis.

Traders are eagerly anticipating tomorrow's announcement from the European Central Bank. Investors are also keeping an eye on the path of Hurricane Irma, would could pose a threat to the southwestern United States in the coming days.

A report released by the Commerce Department on Wednesday showed the U.S. trade deficit came in slightly wider in the month of July. The Commerce Department said the trade deficit widened to $43.7 billion in July from a revised $43.5 billion in June.

Economists had expected the deficit to widen to $44.6 billion from the $43.6 billion originally reported for the previous month.

After reporting a slowdown in the pace of growth in U.S. service sector activity in the previous month, the Institute for Supply Management released a report on Wednesday showing a rebound in the pace of growth in the month of August.

The ISM said its non-manufacturing index climbed to 55.3 in August after falling to 53.9 in July, with a reading above 50 indicating growth in the service sector. Economists had expected the index to rebound to 55.8.

The dollar slipped to a low of $1.1949 against the Euro Wednesday, but has since rebounded to around $1.1920.

German factory orders declined unexpectedly in July on weak domestic demand, figures from Destatis revealed Wednesday. Factory orders fell 0.7 percent month-on-month in July, in contrast to a revised 0.9 percent rise in June. This was the first fall in three months. Orders were forecast to climb 0.2 percent in July.

Germany's construction sector logged a softer growth in August but remained strong in the context of historic survey data, IHS Markit reported Wednesday. The headline construction Purchasing Managers' Index fell to 54.9 in August from 55.8 in July.

The buck dropped to a 1-month low of $1.3081 against the pound sterling Wednesday, but has since bounced back to around $1.3045.

The greenback dipped to an early low of Y108.446 against the Japanese Yen Wednesday, but has since climbed to around Y109.300.

Total labor cash earnings in Japan decreased for the first time in fourteen months in June, defying economists' forecast for a further rise, preliminary report from the Ministry of Health, Labor and Welfare showed Wednesday.